The additional 25 percent Single Borrowers' Limit (SBL) available to banks and quasi-banks which can be tapped to finance Public-Private Partnership (PPP) projects will expire on Dec. 28, the Bangko Sentral ng Pilipinas (BSP) said Tuesday.

This is after the Monetary Board (MB) has decided to allow the lapse for the additional 25 percent SBL, a three-year regulatory relief in 2010 for PPP projects, on Wednesday after it was extended for another three years.

According to the MB, sufficient feasible funding alternatives for PPP project proponents are already available in the market.

In June 2016, the BSP released Circular No. 914 rationalizing the restrictions on lending to subsidiaries and affiliates of banks to support the financing of productive sectors and projects that form part of the priority programs under the Philippine Development Plan and the Public Investment Program.

"In particular, the BSP refined its regulatory guidelines to allow companies the flexibility to engage in different PPP-related project finance activities structured as self-contained special purpose entities (SPEs). Although such SPEs may fall under the definition of an affiliate, they will be treated as independent entities subject to its own SBL if the project cash flows are properly ring-fenced," the central bank explained.

"The same Circular also exempts a bank's or quasi-bank's loans to its related parties for the purpose of project finance from the 30 percent unsecured individual ceiling during the pre-operational phase of a PPP project," BSP added.

There are also syndicated loans that may be structured by existing banks which spread the credit risk exposure arising from big-ticket projects like PPP projects.

Operational PPP projects can be refinanced through issuance of project bonds in the domestic capital market.

Funding arrangements are also possible through multilateral and international development organizations such as World Bank, the Asian Development Bank, and the newly formed Asian Infrastructure Investment Bank (AIIB), and Japan International Cooperation Agency which all support PPP projects.

"The decision of the MB to allow the additional SBL window to close takes into consideration the significant systemic risks from credit risk concentration if the regulatory relief is further prolonged. The MB decision is thus firmly in line with the financial stability objectives of the BSP," the central bank said.

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